Yelp is for sale. Here’s how Google, Facebook, Rakuten would value it.

Yelp Is for Sale. Here’s Who Should Buy It.

Yelp Is for Sale. Here’s Who Should Buy It.

Innovation, the Internet, gadgets, and more.
May 11 2015 2:06 PM

Yelp, Reviewed

The online-ratings site is for sale. How does it rate to its suitors?

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Who should buy Yelp?

Photo illustration by Slate. Photos by Spencer Platt/Getty Images and Jim Young/Reuters

Yelp is looking for someone to buy it, according to reports from the Wall Street Journal and Bloomberg, which say the company is working with investment banks to explore the possibility of a sale. The online customer-reviews site, which went public in 2012, has disappointed investors lately by growing more slowly than they hoped. Still, it won’t come cheap: Word is it would cost upward of $3.5 billion to acquire.

Will Oremus Will Oremus

Will Oremus is Slate's senior technology writer. Email him at will.oremus@slate.com or follow him on Twitter.

Like the fancy new restaurant down the block, Yelp has a line of potential buyers snaking out the door. But is it worth the price?

I may not be a mergers-and-acquisitions professional, but if Yelp has taught us one thing, it’s the value of breezy armchair criticism from amateurs who may or may not know what they’re talking about. In that spirit, I’ve taken the liberty of rating the value of a Yelp acquisition on a scale of 1 to 5 for each potential suitor, using more-or-less arbitrary criteria of my own devising. Feel free to offer your own ratings in the comments. If we average them out, no doubt we’ll arrive at a fair and accurate number for each company. That number, of course, will be 3.5.

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Google—4 Stars: “Tried it once and had a bad experience. But the menu is right up my alley—maybe I’ll give it another shot.”

This is a perfect match—on paper. Google wants to own mobile search and the advertising that comes with it. Yelp is one of a relatively small number of apps that large numbers of people routinely use to search for things on their phones. Google is also known to covet Yelp’s vast trove of customer reviews, which can be used to improve both search results and ad targeting.

There are, however, two big obstacles to a potential union between Google and Yelp. The first one: They hate each other. Google tried to buy Yelp for a reported $500 million in 2009, and the two companies have been feuding since the deal fell through. Google snapped up Zagat as a sort of consolation prize, while also allegedly pushing its own reviews in search results at the expense of Yelp’s. In response, Yelp threw itself into antitrust lawsuits against Google in both the United States and Europe. The second big problem is related: Given the history between the two companies, a Google acquisition of Yelp might well raise fresh antitrust concerns.

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Amazon—3 Stars: “I have a craving for customer reviews, and that’s the specialty here. But these aren’t prepared quite the way I like them.”

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If there’s a company that values customer reviews, it’s Amazon, whose own are a crucial part of the shopping experience that has propelled it to dominance in the e-commerce arena. Having conquered everything from books to electronics to baby products, Amazon is eager to branch into services like plumbing, iPhone repair, and goat grazing (yes, goat grazing), an endeavor that will rely heavily on business reviews similar to the ones Yelp already has.

Similar, however, is a key word. Yelp’s reviews aren’t the same as Amazon’s, and integrating the two could be tricky. Moreover, Amazon’s model has always been about seamlessly connecting customers directly with the thing they want to buy, as opposed to connecting them with the third-party vendors or purveyors of said thing. That might seem like a fine distinction, but it puts Amazon in the role of actually delivering the product and collecting payment, even if it isn’t the vendor. That’s a far more direct route to revenue than being a mere referral service—which is a big reason why Amazon is worth so much more than Yelp in the first place. 

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Yahoo—2 Stars: “It’s tempting, but I’ve spent too much already.”

Yahoo is in the right business—search and advertising—and it’s always hungry for ways to siphon traffic from Google. But it has a history of spending big on hot Internet properties that it then doesn’t know what to do with. Now it’s low on cash, and its investors are low on patience.

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Apple—3 Stars: “Not quite my cup of tea, but hey, what’s $3.5 billion here or there?”

Local advertising is a far cry from Apple’s business model. Then again, it splashed $3 billion on a glorified headphones company, so you never know. It could use Yelp’s reviews to beef up Apple Maps and Siri, both of which have lagged behind their Google counterparts in the quality of their data. It has so much money to burn that it could probably get away with buying Yelp just to spite Google.

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Facebook—4 Stars: “Mm-mm. Can’t get enough of that data!”

At first glance, a business-reviews site might seem like an odd fit for the social network. (So did Oculus VR, for that matter.) But think of it this way: Facebook is the White Pages, and Yelp is the Yellow Pages.

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Facebook has always aimed to be more than a place to post photos and status updates. It wants to be the way that people identify themselves on the Internet, and connecting users’ Yelp reviews and searches to their Facebook profiles would be another step in that direction. Facebook has also been trying to years to make search happen, with about as much success as Gretchen Wieners had with “fetch.” It has mostly given up, but incorporating Yelp data could add a useful new dimension to its social graph. (Think “restaurants in the West Village that my friends have rated at least three stars on Yelp.”) Finally, Facebook would love to be the online front door for businesses the way it is for many individuals—and that’s just what Yelp has become for much of the restaurant industry.

For Facebook, as with Google, data is money, and Yelp’s data could be worth quite a bit. Keeping it out of Google’s hands might be worth even more.

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Priceline—No Rating: “If only I hadn’t shot my whole budget on William Shatner commercials.”

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Rakuten—4 Stars: “So hungry, I’ll eat anything—especially American.”

The Amazon of Japan has been on an acquisition binge as it looks to become the Amazon of a bunch of other countries too. By all accounts, CEO Hiroshi Mikitani would like nothing more than to challenge Jeff Bezos on his home turf. Rakuten has already acquired Buy.com and Ebates, among others, and it recently poured $100 million into Pinterest. In many ways it’s a better fit for Yelp than Amazon, because Rakuten’s business already includes online travel reservations, a similar proposition in that both involve connecting customers to small, local businesses.

That’s the end of my listings. But when you search for restaurants on Yelp, there’s one notable option that never shows up in the results: staying home and cooking for yourself. There’s an analogy here: As antsy as its shareholders are after a yearlong sell-off that has sheared its stock price in half, the best buyer for Yelp might be no buyer.

Yelp isn’t showing the sort of exponential growth that investors would like to see, but few companies do. What it has done instead is build a business that holds value for consumers and turned its first annual profit last year. With wise and patient leadership and some prudent partnerships, it could be sustainable in its current form, with room for healthy growth as it continues to expand overseas. Selling the company would bring investors a tidy short-term return. But, depending on the buyer and what it does with the company, it could also mean the unnecessary end of a good thing. Yelp might only get 2.5 stars on its own Yelp page, but it would still be a shame to see a big “CLOSED” sign next to them.